Canada’s aging population could hike deficits

Aging demographics will put significant stress on government spending, which will result in large deficits and mounting debt in the future, according to a new study by the Fraser Institute.

The population is getting older but governments across Canada are doing very little to prepare for the major spending increases and reduced revenues that are coming as a result, says the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

The study shows that from 2010 to 2063 the share of the Canadian population over the age of 65 will increase from just under 15 per cent to more than 25 per cent, which will necessitate increased government spending.

Increased costs will come at a time when more and more Canadians retire and the labour force participation rate is projected to decline.

Consequently, the aging population will increase deficits for federal and provincial governments to an estimated $143 billion by 2045 — three-and-a-half times larger than the total federal and provincial government deficits in 2017.

Governments will have a stark choice to make — either reform spending programs, enact policies to improve economic growth, run deficits and accumulate debt, and/or raise taxes, the think tank concludes.